Paying out-of-contract or deemed rates can drive up your business energy bills.
In this short guide, we explain what they are and how to avoid paying them.
Out-of-contract rates are the rates that you have to pay when you’re not signed up to a contracted deal with your energy supplier.
This might not sound a normal thing to happen but it could happen to your business if:
- you tell your supplier that you want to terminate your energy contract, but don’t have a new deal in place when it ends
- you’re trying to switch supplier, and your switch takes longer than expected to go through, meaning your contract ends before you can move to your new supplier
Out-of-contract rates can be more than double the typical market rate from your supplier - for example, a standing charge of £1 a day, and a unit rate of 20p/kWh, compared to a typical rate of 25p a day, and 11p/kWh.
There is no limit on the rates a supplier can charge to out-of-contract customers so the cost of a simple mistake can be significant for your business.
With out-of-contract rates, pay close attention to when your contract is due to end and, again, make sure you arrange a new contract well in advance. Don’t just refuse a contract offer in a fit of pique - contact Business Juice and we will provide you with advice on the competitiveness of your offer or otherwise.
If you do decide to refuse the deal then make sure you use Business Juice to secure you a contract that begins immediately that your existing one ends.
If you do get stuck paying deemed or out-of-contract rates but eventually move to a contract with the same supplier, Business Juice can ask the company to backdate the rates from your new tariff to cover the period you were on the higher rates. Some (but by no means all) suppliers will consider doing this as an act of goodwill, however this will be dependent on why you faced these rates in the first place, for how long and your business’s payment history.
Deemed are the rates that you may have to pay when you move into a new premise. Because at the point of moving in you may not have an active contract for that premise with a supplier, you’re ‘deemed’ to be being supplied by the previous tenant’s or owner’s supplier. As a result of being supplied by, but not having an active contract, that supplier needs to charge you something for the energy you consume and that is where deemed rates come in.
Deemed rates are higher than negotiated, contracted rates but will be much lower than out-of-contract rates.
This is because it is not your fault you don’t have a contract, whereas with out-of-contract rates you have made an active decision to not have a contract.
Be wary though, as soon as your inherited supplier makes contact with you and you refuse their offer, you will technically be liable to out-of-contract rates.
Confusingly however, Ofgem, have taken to describing out of contract rates as deemed rates and vice versa. A number of suppliers have followed suit and as a result this can be a misleading area. To understand how your energy supplier describes deemed rates and what they will charge in these circumstances visit our dedicated supplier guides.
The best way to avoid paying deemed rates is to be organised - if you’re moving into new premises, try and arrange your energy contract before you move in, or if this isn’t possible, put it close to the top of your to do list for when you move in.
Using a service like ours at Business Juice will ensure that you can secure a deal for your move in date well in advance. If time is against you we can minimize your exposure to penalty rates and even negotiate with your inherited supplier on your behalf to have any penalty rates lifted.
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To avoid exposure to penalty rates there is no better solution than engagement in the market via Business Juice. If you are worried about the rates you are paying we'd be happy to hear from you, simply give us a call on 0800 051 5770.